CANBERRA

Canberra’s office investment market on radar of national purchasers

2016-03-21T13:00:00Z

Canberra recorded in excess of $500 million of sales volume over 2015 which is the strongest year ever recorded by JLL Research; with six out of nine recent purchasers of office assets being interstate-based groups

Canberra’s office market remains an attractive proposition for domestic investment groups across Australia, in addition to as those based in the ACT, according to global commercial real estate firm JLL.

JLL’s analysis of recent major office transactions in the Canberra market in the last 12 months has shown interstate-based property groups to be the dominant purchaser category, accounting for six out of nine recent purchasers. The other three purchasers were two locally based private buyers and one offshore entity from Korea.

JLL’s Head of Sales and Investments ACT, Michael Heather, said, “The Canberra office investment market recorded significant sales volume over 2015 of $537.9 million, for sales over AUD $5 million, which is the strongest year ever recorded by JLL Research. This demonstrates a resurgence of confidence amongst investors for Canberra office assets and provided insight into pricing benchmarks. Investors are once again recognising that there is excellent value in Canberra relative to other Australian capital cities. Canberra is considered a counter-cyclical market to Sydney and Melbourne, offering materially higher risk-adjusted returns.”

According to JLL’s latest Office Investment Review and Outlook report, capital values in Canberra increased in 2015 by 5.9%. This is sharper growth than what was recorded in 2014 (2.9%). In 2013, capital values decreased by -1.5%. Transaction volumes for Australia’s office investment market surpassed the $15 billion mark in 2014 and 2015.

Furthermore, the Canberra office market recorded net absorption of 18,000 sqm over 2015. A large portion of this figure was attributed to a reduction in sub-lease vacancy which fell by 59% over 2015, to 15,600 sqm. Mr Heather said it was noteworthy to consider that Canberra has recorded just three negative net absorption years between 1979 and 2014, according to JLL Research. Conversely, Sydney has recorded 12 years and Melbourne nine years of negative net absorption over the same time period.

“Recent transaction evidence has seen average prime equivalent yields compress by 50 basis points to range between 6.50% and 9.00%. However, average prime equivalent yields remain 100 basis points higher than the level recorded in 2007 which means the Canberra office market currently appeals to multiple buyer cohorts.” Mr Heather said.